The Eurogroup on Friday approved the positive recommendation of the institutions (European Commission) and the Euro Working Group for the disbursement of the 978 million euros to Greece, finance ministry’s sources said.
The tranche represents the return of the profits held by the European Central Bank and national central banks in the EU from Greek bonds (ANFAs and SMPs), as well as the suspension of the interest rate increase of the second loan agreement, as part of the medium-term debt relief measures. Once the disbursement by the Eurogroup has been approved, national approval procedures will be launched, including votes in some parliaments, such as the German one.
It is noted that, according to the same sources of the finance ministry, the climate during the meeting was very positive regarding Greece and the progress of reforms.
Eurogroup president Mario Centeno said the decision was reached based on the institutions’ positive evaluation of Greece’s agreed commitments – including the 2019 State Budget and the completion of “important structural reforms” that included the legislation on primary residence protection and household insolvency. “This law will be temporary and be applied until the end of 2019,” Centeno said, referring to Greek Finance Minister Euclid Tsakalotos commitments on this score, adding that the European Commission will monitor the fiscal and financial impact of the measure.
Centeno said that the approval of the disbursement is another “positive sign” for investors, especially as regards the “ownership” of the reforms, something that has already been reflected in the markets’ reaction.
The head of the European Stability Mechanism (ESM) Klaus Regling on Friday reiterated that the exact amount of the disbursement to Greece is 973 million euros, of which 644 million are from the return of the profits of European central banks from Greek bonds and the rest from the suspension of the interest surcharge for the second loan contract.
He noted that this was not a new loan but a ‘transfer’ of capital without conditions, subject only to Greece’s commitment to continue reform efforts, and something that will help the country pay off its loans.
Regling said that the disbursement will be completed when approval procedures by national parliaments are concluded and “not later than early May”.
Asked about Greece’s intention to pay off a part of its debts to the IMF early, he said that the ESM “would support this,” while noting that this should be first discussed with the country’s creditors to ensure that all the requirements are met. Besides, he added, an early repayment would contribute to the sustainability of Greek debt, as Greece is currently paying very high interest rates (5 pct) for one third of its IMF’s loans (3.5 billion euros), which is “much higher” than the borrowing cost on the markets.
European Commissioner for Economic and Financial Affairs Pierre Moscovici said that the Eurogroup’s decision on Friday for the disbursement of approximately 1 billion euros to Greece was “one more step” toward making the Greek issue “a success story,” while adding that it was a “strong signal” to investors and the markets as it proves that Greece is continuing reforms and that its European partners continue to support it.
“Greece has done everything it could to respect its commitments,” stated Moscovici, noting that the European Commission submitted the updated Enhanced Surveillance Report on Greece on Wednesday in order to prepare Friday’s decision.
Referring to the successor of the Katseli law on household insolvency and primary residence protection, he said that it serves a specific purpose, which is to protect vulnerable households without undermining the efforts for the reduction of non-performing loans, while noting that the measure must be “temporary”.